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THE OECD AND ASIA: WORLDS APART IN TODAY’S GLOBALIZATION?
LA OCDE Y ASIA: ¿DOS MUNDOS APARTES EN LA GLOBALIZACIÓN ACTUAL?
John West
Asian Development Bank Institute
[email protected]
Recibido: octubre de 2010; aceptado: abril de 2011
ABSTRACT
When the Organisation for Economic Co-operation and Development
(OECD) was created half a century ago in 1961, its members accounted for
the lion’s share of the world economy and that remained the case for almost
three decades. Major international developments occurred from the late
1980s like the end of the Cold War; and the return of stability, open markets
and democracy to Latin America. But the OECD countries’ global economic
predominance was only really challenged by the rise of East Asia through its
export-oriented growth strategies.
The OECD responded to all these developments by inviting countries to
join the Organisation and participate in outreach activities. But what is striking
in this opening of the OECD membership is the lack of a visible presence of
Asia and a growing “eurocentricity”. The OECD’s membership has grown by 10
countries (to 34) over the past 17 years, but only one of these new members
(Korea) comes from Asia. Based on current trends, the OECD seems condemned
to represent an ever declining share of the world economy.
As the OECD enters its second half century, it is very much at a crossroads.
This paper argues that for the OECD to be a more effective and legitimate
player in global governance, it needs to make a major and immediate effort
to recruit large Asian countries as members, even if it means adopting a more
flexible approach to membership criteria and adapting the organisation. While
Asia’s leading economies would have much to gain from joining the OECD and
accepting and committing to the Organisation’s policy standards, the OECD
has to recognize that the global financial crisis has brought the “Western
brand” (which the OECD represents) into serious disrepute. This underlines the
argument for greater flexibility with respect to membership criteria.
As major beneficiaries of globalization, Asia’s leading economies arguably
have a responsibility to adopt more of the OECD’s values-based culture in
terms of good governance and transparency. Just as importantly Asia can
contribute to this organizational culture which has always evolved and needs
to evolve further. This would ultimately be beneficial to them and the global
economy, and they would thereby become more responsible stakeholders in
the global system.
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Keywords: OECD; Asia; International Organisations; International Relations;
International Political Economy.
RESUMEN
Cuando la OCDE fue creada hace medio siglo, en 1961, sus miembros
representan la mayor parte de la economía mundial y esa proporción se mantuvo
durante las tres décadas siguientes. Algunos acontecimientos internacionales
tuvieron importancia durante la década de 1980, como el final de la Guerra
Fría, el inicio de una nueva fase de estabilidad y apertura de los mercados y
la instauración de la democracia en América Latina. Pero el predominio de
los países de la OCDE en economía mundial fue tan sólo desafiado por las
economías de Asia Oriental, como resultado de sus estrategias de crecimiento
orientado a la exportación.
La OCDE respondió a todos estos acontecimientos, invitando a los países
a integrarse en la organización y participar en algunas de sus actividades de
difusión. Pero lo que sorprende en esa apertura de la OCDE es la falta de
presencia relevante de Asia y un creciente “eurocentrismo”. En los últimos 17
años, los países miembros de la OCDE han aumentado en diez (34), pero sólo
uno de estos nuevos miembros (Corea) proviene de Asia.
Sobre la base de las tendencias actuales, la OCDE parece condenada a
representar un porcentaje cada vez menor de la economía mundial. La OCDE entra
así en su segundo medio siglo en una encrucijada. Este documento sostiene que
para que la OCDE sea un agente más eficaz y legítimo en la gobernanza mundial,
es necesario que haga un esfuerzo importante e inmediato para integrar grandes
países asiáticos como miembros de pleno derecho, incluso si esto significa la
adopción de un enfoque más flexible de los criterios de ampliación y adaptación
de la organización. Mientras que las principales economías de Asia tienen
mucho que ganar al integrarse a la OCDE, aceptando y comprometiéndose con
las normas de política de la organización, la OCDE tiene que reconocer que la
crisis financiera mundial tiene un claro carácter “occidental” (representativa de la
OCDE) que implica un grave descrédito. Esto pone de relieve el argumento que
exige una mayor flexibilidad con respecto a los criterios de adhesión
Como principales beneficiarios de la globalización, las principales economías
de Asia tendrían la responsabilidad de adoptar una la cultura basada en los
valores de la OCDE, tanto en términos de buen gobierno como de transparencia.
Asimismo, estos países pueden contribuir a una cultura que ha permitido
evolucionar a la organización. En última instancia, esto sería beneficioso para
Asia y la economía mundial, y constituiría a los países asiáticos en agentes
más responsables en el sistema global.
Palabras clave: OCDE; Asia; Organizaciones internacionales; Relaciones
internacionales; Economía Política internacional.
JEL Classification: F53; O19.
1. INTRODUCTION
When the Organisation for Economic Co-operation and Development
(OECD) was created half a century ago in 1961, its members including Japan
(which in fact became a member in 1964) accounted for almost 60% of global
GDP1. They were mostly either advanced economies, or economies rapidly
recovering from the war and economic depression that had characterised the
first half of the 20th century.
Much of the rest of the world could be classified as either communist
countries, or developing countries whose economic policies shared similarities
with the communist world in terms of inward-looking development strategies, with
a strong involvement of the state at the expense of market mechanisms. While
some of these economies enjoyed periods of strong growth, overall their
economic performance was relatively poor. As Western Europe enjoyed a long
and successful period of economic catch-up, the OECD group remained on top
of the world economy for many years.
Major international developments occurred from the late 1980s. The Cold
War came to an end, and many former communist countries democratised
and became increasingly successful market economies. In Latin America,
hyperinflation, debt crisis and military dictatorships were replaced by economic
stabilisation, open market policies and democracy in many countries. But the
OECD countries’ global economic predominance was only really challenged
by the rise of East Asia through its export-oriented growth strategies (see also
Clifton and Díaz, 2011).
The OECD responded to all these developments by inviting countries to
join the Organisation and participate in outreach activities. But what is striking
in this opening of the OECD membership is the lack of visible presence of Asia.
The OECD’s membership has grown by 10 countries (to 34) over the past 17
years, but only one of these new members (Korea) comes from Asia.
1
Maddison, Angus. Historical Statistics for the World Economy:1 to 2003 AD. Accessed on 6 August
2010, http://www.ggdc.net/maddison/Historical_Statistics/horizontal-file_03-2007.xls
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Against this background, this paper will explore three main questions: why
is Asia so little present in the OECD membership; does this matter; and what
if anything should be done to address this problem or situation. There are
several possible reasons why Asia is so little present in the OECD membership
despite its stunning economic development, and why certain countries like
Mexico and Chile in Latin America, six countries from Central Europe, and Israel
have become members. Some Asian countries do not fully abide by the OECD
values of democracy and market economy. In addition, there has never been
a great lobbying campaign on their behalf by existing member countries, the
majority of which are European. By contrast, the former communist countries of
central Europe had western European neighbours (and also the United States)
pushing their case, and Mexico had the US insisting it become a member. To
be sure, Korea’s membership was supported by several countries like Japan
and Australia, but there was no active lobbying campaign on behalf of Asia
on the same scale as for the other aforementioned countries. Perhaps Asian
countries, which are generally attached to their developing country status, were
deterred by the North Atlantic character of the OECD. The OECD Secretariat
itself, geographically and culturally far from Asia, and dominated by European
nationals, may also have been less effective in selling the Organisation.
Does it matter? On the basis of how the Organisation perceives and
presents itself, the answer must be “yes, it does matter”! The OECD leadership
sometimes refers to the Organisation as a “hub of globalization”2. This
is patently not the case when the big dynamic economies of Asia -- China,
India and Indonesia -- which are today’s main motors of globalization, are not
members of the Organisation, and there is no immediate prospect of them
becoming members.
Overall, OECD has only two member countries from Asia, being Japan and
Korea. By contrast, the World Trade Organisation’s list of the world leading
merchandise exporters3 includes 10 Asian economies in its top 34 exporters,
namely, China, Japan, Korea, Hong Kong, Singapore, Taiwan, Malaysia, Thailand,
India and Indonesia. While some of Asia’s big dynamic economies like China,
India and Indonesia still have relatively low levels of GDP per capita, this is
not true for economies like Hong Kong, Macao, Singapore and Taiwan, which
have levels of economic development around that of the most advanced OECD
member countries.
The OECD’s leadership is also only too vividly aware of the tension arising
from the fact that a number of G20 members are not members of the OECD.
This can limit the OECD’s capacity to participate in and contribute to the
activities of this Group, whose leaders have “designated the G-20 to be the
2
Gurria, A. (2007): ‘Making the World Economy Work Better’, OECD Observer No. 262, July 2007,
http://www.oecdobserver.org/news/fullstory.php/aid/2294/Making_the_world_economy_work_better.
html
3
WTO, International Trade Statistics 2009 – www.wto.org
THE OECD AND ASIA: WORLDS APART IN TODAY’S GLOBALIZATION?
premier forum for our international economic cooperation”4. In particular, some
non-OECD G20 members like China have reportedly resisted the inclusion of
OECD and some of its important work in the G20 process because they were
not OECD members.
This paper will argue that the OECD is an organisation caught between
economics and politics. Its functional activities are inherently economic, while
decisions regarding membership are mainly political. This greatly hampers its
capacity to fulfill its basic functions of addressing “the economic, social and
environmental challenges of globalization, as well as exploit its opportunities”5.
This paper argues that for the OECD to be more effective and legitimate
player in global governance, it needs to make a major and immediate effort
to recruit large Asian countries as members, even if it means adopting a more
flexible approach to membership criteria and adapting the organisation. While
Asia’s leading economies would have much to gain from joining the OECD and
accepting and committing to the Organisation’s policy standards, the OECD
has to recognize that the global financial crisis has brought the “Western
brand” (which the OECD represents) into serious disrepute. This underlines the
argument for greater flexibility with respect to membership criteria.
As major beneficiaries of globalization, Asia’s leading economies arguably
have a responsibility to adopt more of the OECD’s values-based culture in terms
of good governance and transparency. Just as importantly Asia can contribute
to this organizational culture which has always evolved and needs to evolve
further. This would ultimately be beneficial to them and the global economy,
and they would thereby become more responsible stakeholders in the global
system. This positive assessment of the benefits of OECD membership is based
on my work experience of over 20 years at the OECD.
In making this argument, this paper addresses the following issues: Asia and
the evolving logic of OECD membership; Non-member partnerships with Asia;
Why Asia matters to the OECD; Adapting the OECD to Asian-led globalization;
Asia in the OECD; and some Concluding Comments.
2. ASIA AND THE EVOLVING LOGIC OF OECD MEMBERSHIP
Although most of the OECD’s activities are “economic”, and the “E” in OECD
refers to “economic”, membership of the OECD has always been fundamentally
a political issue. The politics of membership have evolved over the past half
century which means that there is not one coherent logic for the choice of
OECD’s members. But one clear thread runs through this evolving logic, and
this is the OECD’s “North Atlantic” (rather than global) character. This has
persisted into the post Cold War era when the OECD’s leading members have
often used the Organisation as an instrument of cultural hegemony to project
4
5
G20 Leaders’ Statement, the Pittsburgh Summit, September 24-25, 2009.
OECD, “The OECD’s Global Relations Programme 2009-10” – www.oecd.org
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and spread North Atlantic values, even though the world’s leading economies
are characterized by a variety of value systems.
2.1. OEEC PERIOD – 1948 TO 1960
The Organisation for European Economic Co-operation (OEEC), the OECD’s
precursor, was created to administer the Marshall Plan after World War 2. The
Marshall Plan can be seen as part of the actions of the US hegemon to create
an international system to promote peace, prosperity, stability and security6.
The OEEC and the Marshall Plan were very much "North Atlantic" in
character, not global. They were financed by the US and Canada, with the
recipients being European countries. The Marshall Plan not only provided
money to countries of Western Europe, but it obliged Europe’s former warring
nations to work together. This laid the foundation for what is now called the
European Union and other co-operation.
Importantly, there was no values-based conditionality of democracy, human
rights and market economy for OEEC membership. The Marshall Plan also had
one characteristic which has remained with the OECD. That is, while its function
was economic, its ultimate goal was political stability and security. The opening
clause of the OECD’s Convention states that “economic strength and prosperity
are essential for the attainment of the purposes of the United Nations, the
preservation of individual liberty and the increase of general well-being”7.
The Marshall Plan was never destined for countries outside of Europe. Around
the time, Japan was occupied by the American victors of World War 2, and the
Korean peninsula was at war. The Chinese Communist Party had just won the
country’s civil war. Much of the rest of Asia was beginning decolonialisation, and
relationships with Western countries mainly focused on official development
assistance from previous colonial masters. Following the post-war occupation,
the US established separate economic and security arrangements with Japan,
as it did for Korea after the end of war on the peninsula. Many other events
were to follow like the Vietnam war, the creation of Association of Southeast
Asian Nations (ASEAN) and the playing out of the Cold War in Asia. But the
main point is that the US launched separate economic and security systems
for Europe and Asia. This was the basis of the Cold War hegemonic new order
centred around the US.
In summary, the initial logic of the OECD (through its predecessor, the OEEC)
was to help the reconstruction of the countries from a war ravaged Europe,
which then faced the threat of communist USSR. As is usual with all clubs,
all the initial members are still members over 60 years after the creation of
6
OECD. The Marshall Plan: Lessons Learned for the 21st Century http://www.oecd.org/document/63
/0,3343,en_21571361_38695295_41320319_1_1_1_1,00.html
OECD, Convention on the Organisation for Economic Cooperation and Development, Paris, 14th
December 1960 – www.oecd.org.
7
THE OECD AND ASIA: WORLDS APART IN TODAY’S GLOBALIZATION?
the OEEC. This organizational “stickiness” means that an evolving organization,
as the OECD has been, will never maintain a coherent organizational logic,
and will probably always struggle to evolve. But the sign of Asia was on the
horizon, as Japan joined the OEEC’s Development Assistance Group in the last
moments of the OEEC.
2.2. COLD WAR OECD
When the OEEC was transformed into the OECD in 1960, the world had
moved on, and clear blocs of countries had emerged. The OECD’s founding
members were all North Atlantic countries, that is, from Europe or North
America, and 16 of the founding 20 members were not surprisingly also
members of NATO. The OECD group of countries could be seen as the “West”
vis-a-vis the communist “East”, and the “North” vis-a-vis the developing “South”.
There was no founding OECD member from Asia, although Japan was hovering
in the background.
In the Cold War context, Japan quickly became part of the West benefiting
from an American security umbrella, aid and open markets, with democratic
politics and market economics imposed on it. Thanks to this, as well as its own
dirigiste industrial policies which were to prove very effective for a number of
decades, Japan made very rapid economic progress. Japan’s GDP per capita
recovered to pre-war levels by the early 1950s. Its rapid economic growth
would continue through the 1960s, with it surpassing West Germany to become
the world second largest economy by 1968.
It was against this background that Japan was invited to become a member
of the OECD in 1964. Despite many thousands of miles, Japan was de facto
a North Atlantic country. This history still haunts Japan today as it struggles
to find its place in a resurgent Asia. Japan’s membership of the OECD was
very much symbolic of its successful post-war recovery. In the very same year,
Japan hosted the Olympic Games (a first for Asia), and witnessed the first
bullet train.
But while Japan immediately had an equal seat at the OECD table with
other members, it would be a “quiet participant” for many years. Japan did
not have a position in the OECD’s senior management until 19908, some 22
years after it became the world’s second biggest economy. It was neither very
assertive nor did it have many senior level staff members. Even today, despite
its many calls for Asia to play a more active role in global governance, Japan
has the OECD’s second lowest (after Switzerland) percentage of OECD officials
in comparison to OECD budget contribution. Japanese nationals represent
only 5% of OECD Secretariat staff compared with a budget contribution of
8
A Deputy Secretary-General position was created for Japan in 1989. It was initially occupied in
1990, and exists to this day.
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14%9 notwithstanding massive searches undertaken by the OECD Human
Resources Service.
It is not surprising that the subsequent new members from the Cold War
period were also members of the Western alliance -- Finland (1967), Australia
(1971) and New Zealand (1973). Though part of the Asia-Pacific region, these
latter two countries were much more European than they are today. It is
interesting to note that around the year 1980, deep in the Cold War period, a
number of Asian economies had GDPs per capita of an “OECD-level”, and were
arguably “economically qualified” for OECD membership. The GDPs per capita
of Hong Kong and Singapore were around the same level as Greece, Ireland,
Portugal and Spain, while Korea, Malaysia and Taiwan were in the same ballpark
as Turkey10. There was, however, no suggestion at the time of these “developing
countries” being considered for OECD membership.
One aspect of the OECD’s democratic credentials is that it has always
had relations with non-governmental stakeholders. From its very early
days, the OECD cooperated with the business sector through the Business
and Industry Advisory Committee (BIAC) and trade unions through the
Trade Union Advisory Committee (TUAC), and in subsequent years it would
establish very substantial dialogue with civil society organizations. In sharp
contrast, the Asia-Pacific Economic Cooperation group (APEC) works closely
with the business sector through the APEC Business Advisory Council, but
does not have any cooperative relations with trade unions or civil society
organizations.
In conclusion, during the Cold War period, the OECD was very much a
North Atlantic bloc of countries, as distinct from developing countries and the
communist countries. Although democratic values were not yet mentioned, it
was part of the culture of the organization. It was after all a bastion against
communism. Apart from Japan, a staunch ally of the West, other Asian
countries simply did not fit into the OECD mould.
2.3. POST-COLD WAR OPENING OF OECD
The end of the Cold War in 1989, and the rapid industrialization and
development of what came to be known as emerging economies led to a crisis
of identity for the OECD. What was the relevance of a fundamentally Cold War
organisation in a new post-Cold War world?
It was around that time that OECD ministers agreed that the OECD
membership shared certain values. At their annual meeting in May 1990, OECD
Ministers welcomed “the historic changes taking place in Europe, particularly in
Germany. These developments, together with the recent evolution of a number
of the developing countries, represent a movement towards the basic values
9
OECD. OECD Staff Profile Statistics 2009. C(2010)30
Maddison, Angus, ibid.
10
THE OECD AND ASIA: WORLDS APART IN TODAY’S GLOBALIZATION?
which are common to the OECD countries: pluralistic democracy, respect for
human rights, and a competitive market economy. They improve the prospect
of a truly integrated global economic system11”. In reality, this was a case of
mid-life identity construction that was to become the philosophical basis of
invitations to new members. It also meant that as we were moving into the
“post North Atlantic era” of globalization, the OECD would remain a bastion of
North Atlantic values, even if it did not always strictly apply those principles.
Thus, the OECD was seen to be a values-based organisation, even if not all of
its existing members adhered perfectly to those values – and even though this
important decision was never incorporated in the OECD Convention. Therefore,
implicitly, the OECD was open to membership by countries that were willing
and able to abide by these values.
Importantly, by defining itself as a values-based organization, rather
than an organization that brought together the world’s major and most
dynamic economies, it committed itself to the destiny of declining global
economic significance, and basically excluded some of Asia’s most important
economies. It also meant that the price of OECD membership was adopting
North Atlantic values.
With the definition of such values being rather subjective, the next wave
of opening to new members involved inevitable political horse-trading.
Mexico was the first country to join in 1994, against the background of
the NAFTA negotiations and the major policy reforms undertaken by the
Salinas government, and despite its questionable democratic credentials.
The Institutional Revolutionary Party (Partido Revolucionario Institucional or
PRI) had held power in the country for about 70 years. At the 1993 OECD
Ministerial Council Meeting, four American cabinet secretaries banged the
table “Mexico, Mexico, Mexico, Mexico”12. Within one year, Mexico became
an OECD member and was present at the 1994 Ministerial Council Meeting.
In exchange, at 1993 Ministerial meeting, European OECD members
extracted a soft mandate for eventual membership by the Czechoslovakia (which
would subsequently split in the Czech and Slovak Republics), Hungary and
Poland – even though these countries still had a long way to go in establishing
a full-fledged market economy and democracy. The Czech Republic would
become a member in 1995, and Hungary and Poland in 1996, both ahead
of Korea which joined at the very end of 1996 (the Slovak Republic’s troubled
politics would stop it from becoming a member until 2000).
At the time of the 1993 Ministerial Council Meeting, Korea’s GDP per
capita was 60% higher than Mexico’s, and similarly higher than the central
European countries. Nevertheless, OECD ministers were much more cautious
as they welcomed “the positive evolution of Korea´s involvement in OECD
11
OECD, Meeting of the Council at Ministerial Level in May 1990, Communique http://www.
g7.utoronto.ca/oecd/oecd90.htm
12
OECD, Meeting of the Council at Ministerial Level in June 1993. Communiqué http://www.
g8.utoronto.ca/oecd/oecd93.htm
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activities, which enhances mutual understanding and also paves the way for
early membership”. Korea would not become a member until 12 December
1996.
Ultimately Korea would have to fight tough political battles to make it
through the OECD accession process to membership despite widespread
support especially from Australia and Japan. A major issue was its alleged harsh
treatment of trade unionists, a violation of the OECD’s philosophical value of
respect for human rights13. When the OECD invited Korea to join the OECD, it
welcomed the commitments made by the Korean authorities “to reform existing
laws on industrial relations in line with internationally-accepted standards,
including those concerning basic rights such as freedom of association and
collective bargaining”. The Council also instructed the OECD’s Employment,
Labour and Social Affairs Committee “to monitor closely the progress made on
labour law reforms in the light of that commitment”.
In short, it could be argued that the OECD Council had “gone soft” on Mexico
and the Central European countries, and “gone tough” on Korea by imposing
post-membership policy monitoring. Korea had become an economic miracle,
with a relatively unique model of development, similar to the case of Japan.
OECD membership provided another means of exerting policy pressure on
Korea. This is probably the key to the OECD’s interest in Korea’s membership.
Like Japan, Korea was very pleased to join the OECD in part because of the
prestigious recognition of its miracle development. There may be very few
other developed countries as status conscious as Japan or Korea. Even today,
the visit of the OECD Secretary-General to Korea is treated like a state visit,
whereas in many other countries the Secretary-General can struggle to get a
brief meeting with a Minister.
Even though the OECD had developed programmes of cooperation and
dialogue with Asia’s dynamic economies, it seemed to struggle to convince
them of the benefits of membership. And while Japan and Korea, perhaps
by virtue of their special security relations with the US, were happy enough
to wear the North Atlantic badge of OECD membership, other countries in
Asia were keen to keep their developing country political identity, even if it
no longer fitted in economic terms. The OECD brand was also not helped by
the fact that both Mexico and Korea had financial crises about a year after
they joined the Organisation. Many questions were raised about the validity
of the policy adjustments that were demanded as part of the price of OECD
membership, most notably with regard to the OECD’s Code of Liberalisation of
Capital Movements.
This wave of new members was significant in many ways. First, politics more
than economics was behind the new membership decisions, especially in the
case of the central European members, but also Mexico. Second, although
Asia had already become the most dynamic part of the world economy, only
13
Oecd: Labour Market Reform and Social Safety Net Policies in Korea, Oecd Policy Brief, October
2000, Http://Www.Oecd.Org/Dataoecd/2/54/1917886.Pdf
THE OECD AND ASIA: WORLDS APART IN TODAY’S GLOBALIZATION?
one of the six new members came from Asia. Third, despite the onward march
of Asian-led globalization, OECD was arguably becoming even more “North
Atlantic” and “euro-centric”, with 22 of its 30 members coming from Europe.
2.4. 2007 MEMBERSHIP OPENING
Although the membership question was always on the table, the OECD
took more than ten years following the previous wave of new members before it
invited any more countries to start membership discussions. It digested its new
members, made some internal governance changes and undertook reflections
on the membership question. While the OECD was deep in reflection about
which countries to invite to join the Organisation, the “Western brand” (which
the OECD represents) received a sharp jolt during the 1997 Asian financial
crisis. In particular, the International Monetary Fund was perceived to have
greatly mishandled the crisis management to such a point that many of Asia’s
leading policy makers and academics still talk of the “IMF Stigma” which holds
Asian countries back from borrowing from the IMF to this very day14.
Emerging Asia brilliantly navigated its way through the 1997 Asian
financial crisis, and then China celebrated its 2001 membership of the World
Trade Organisation by embarking on its fastest decade of economic growth.
Already in 2000, the GDP per capita of Hong Kong, Macao and Singapore
exceeded that of most advanced OECD countries, including Canada, France
and Germany. By this time, Taiwan had surpassed Greece, Portugal and Spain,
while Malaysia and Thailand had reached the same broad level as Hungary,
Mexico, Poland and Turkey.
By 2007 OECD ministers decided to invite five countries to start
membership negotiations, viz, Chile, Estonia, Israel, Russia and Slovenia. This
decision represented a continuation of previous trends. Apart from Russia
(whose membership is probably still a long way off), the selected countries
are rather small. There was also a European bias, and no Asian country
was included. Many saw the invitation to Israel as a confirmation of the
OECD’s North Atlantic bias and “flexible” application of its values, because
of perceptions of its disrespect for human rights. Once again, clearly politics
was driving the decision-making as much as economics. All of these countries
except for Russia have since become OECD Members, although none of them
are members of the G20.
It seems clear that OECD membership is most attractive for smaller countries
which have most to gain in terms of the prestige of membership, and the access
to information, advice and policy networks. As OECD Secretary-General Angel
Gurria once said “At the OECD, we pay great attention to the lessons that
can be learned from the experiences of some of our smallest members: from
14
Yoon, Bong Joon: The IMF Bailout in Korea: A Socialist Poison, http://mises.org/journals/scholar/
asia.PDF
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Finland on education, for example, from Denmark on social welfare and labour
policies, or from Ireland on fiscal policy and entrepreneurship”15.
In conclusion, the criteria and logic for OECD membership have never
made it an attractive organization for possible Asian membership It is difficult
to escape the conclusion that the OECD remains and ironically has become
more and more of a North Atlantic club in tandem with the advance of Asianled globalization. Its large number of European members have given rise to
accusations of “eurocentricity”, and this eurocentricity has also probably
intensified over the past two decades. The fact that 75% of OECD Secretariat
staff are European16, while Europe’s share of OECD GDP is less than 40%,
would not help foster an Asian sensitivity.
2.5. OECD’S EUROCENTRICITY
The issue of the OECD’s eurocentricity came to a head in the 2005-2006
process of electing a new Secretary-General to replace Donald Johnston. He
said in a 2005 Financial Times’ interview that it would be “very healthy” for
the Organisation if his successor came from an Asian country17. Both Japan
and Korea did nominate candidates, Sawako Takeuchi and Han Seung-soo
respectively, who promised to open the Organisation more to the dynamic
economies of Asia. But neither of these candidates made it past the first round
of the selection process.
In a 2006 International Herald Tribune article (reported in the New
Economist blog18), Johnston questions how can an organization shape the
global economy if it is basically working with a minority of it. He questioned
“Why is the OECD the policeman for democracy?”. Johnston noted that
European dictators, including António de Oliveira Salazar of Portugal and
Francisco Franco of Spain, were among the leaders of founding countries of
the OECD. “I think that democracy will evolve in China, and it will have much
more chance of evolving in China if they are at the table of the OECD than if
they are not,” Johnston said.
There were many other commentators on the OECD’s eurocentricity, most
notably former Finnish Ambassador to the OECD, Pasi Rutanen. In an April
2005 speech19, Rutanen argued that “Mr Johnston could have said much
more about the Organisation’s eurocentric inclinations”. He casts the blame
15
Gurria, Angel, The Shifting Power Equation: Implications for Smaller Countries. Speech at “Avenir
Suisse” Foundation Zürich, 6 March, 2007, http://www.oecd.org/document/63/0,3343,en_2649_20
1185_38377151_1_1_1_1,00.html
16
OECD. OECD Staff Profile Statistics 2009. C(2010)30
17
Financial Times, “Six in Race to Become next Head of OECD” by Chris Giles and John Thornhill. July 20
2005. http://www.ft.com/cms/s/0/95e17cd2-f964-11d9-81f3-00000e2511c8.html#axzz1KrTlnUdf
18
New Economist, “Is the OECD Losing its Way?” 13 February 2006. http://neweconomist.blogs.com/
new_economist/2006/02/is_the_oecd_los.html
19
Rutanen, Pasi, “The OECD, Asia-Pacific and Eurocrats”. A speech from April 2005. Text is
unpublished, and was provided by the author.
THE OECD AND ASIA: WORLDS APART IN TODAY’S GLOBALIZATION?
for the OECD’s eurocentricity on inward-looking Europeans who took a long
time before they realised “the implications of the power shift that is moving the
epicenter of the world economic dynamism towards East Asia and the Pacific
Rim. Many of the transatlantic romantics in the European foreign ministries
still don’t get it.”
3. NON-MEMBER PARTNERSHIPS WITH ASIA
The OECD has for a long time conducted non-member partnership activities
with Asia. Japan became a member of the OEEC’s Development Assistance
Group before joining the OECD. Korea was a member of the Working Party on
Shipbuilding from the late 1980s.
For much of the Cold War period, the OECD’s relations with Asia were
confined to the OECD’s Development Centre20 which functioned as an “arm’s
length window” on the developing world. Even today, the OECD Development
Centre has been recruiting non-OECD countries as members, with India,
Indonesia, Thailand and Vietnam joining up. This only provides a very limited
vector of cooperation with the OECD, since major OECD Member countries
like the United States, Japan and Australia withdrew from Development Centre
membership some time ago.
In addition to expanding its membership after the Cold War, the OECD also
launched major programmes of outreach to non-member countries, in part to
prepare them for possible membership, but also to respond to globalization.
For much of the 1990s, these outreach activities concentrated on the former
communist countries. The dynamic economies of Asia and Latin America
were a much lower priority. This reflected the political priority attached to the
transition by the former communist countries to full fledged democracies and
market economies. These former communist countries were the “lost sheep”
of the North Atlantic community which were prevented from benefiting from
the Marshall Plan by the Soviet enemy. However, by the 2000s decade, China
had grown to become the most important outreach partner, as its dynamism
continued, and developments in Russia became more problematic.
In parallel to the 2007 membership opening, OECD ministers agreed to
launch a programme of “Enhanced Engagement” with Brazil, China, India,
Indonesia and South Africa, all of which are G20 members. This programme
is aimed at preparing these countries for possible future membership (even if
preparation of the non-democratic China’s membership would be a long haul
process). Many valuable studies are undertaken, and conferences and missions
organized.
The split between those countries invited to become members and the
Enhanced Engagement group is explained by the fact that all countries in
20
OECD Development Centre, http://www.oecd.org/department/0,3355,en_2649_33731_1_1_1_1
_1,00.html
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the former group had expressed interest in OECD membership, and were
given a positive response, whereas the Enhanced Engagement Group had not
expressed an interest in membership (indeed, some of these countries quite
clearly do not want to become members of the presently very “North Atlantic
OECD”). In other words, the OECD wants these latter countries to be members
more than they would like to join.
Thanks to the Enhanced Engagement programme, these five big countries
are now involved in most OECD activities, and even sit at the same table as
OECD ministers at their annual Ministerial Council Meeting. In appearances,
these countries may seem to be de facto members of the OECD, but in reality
they do not take part in its formal decision making, or contribute to its budget.
This Enhanced Engagement Programme has been described by a very senior
OECD official as a “one way love affair”, with the three countries having no
interest whatsoever in OECD membership, even though they are participating
actively in the Organisation.
A programme was also established with Southeast Asia, which is deemed to
be a region of strategic interest to the OECD in light of its growing importance.
The latter programme was essentially the product of political horse-trading by
which some non-Europe OECD members like Australia extracted a concession
in exchange for agreeing to more European members of the Organisation (see
Kellow and Carroll, 2011).
For some years now, the OECD has been involving non-members in its over
40 principal functional committees (like the Environment Policy Committee,
Committee on Fiscal Affairs, Investment Committee or the Trade Committee),
but Asia is much less present than other regions21. China is a regular observer
in only two OECD committees, in the areas of science and technology, and
fiscal affairs. India participates in committees for competition policy, consumer
policy, health, information technology, science & technology, statistics and
steel. Indonesia only participates in a tax forum and one education group.
Hong Kong, Malaysia, Singapore, Taiwan and Thailand each participate in one
or two committees.
Since the general opening of the OECD over the past two decades, nonmembers have been welcome to participate in OECD instruments on the same
terms as OECD members. For example, in addition to the 34 OECD member
countries, four non-member countries have signed on to the OECD Anti-Bribery
Convention, namely Argentina, Brazil, Bulgaria, and South Africa. This Convention
establishes legally binding standards to criminalise bribery of foreign public
officials in international business transactions and provides for a host of related
measures that make this effective. Similarly, some 8 non-member countries have
adhered to the OECD Guidelines for Multinational Enterprises, in particular,
Argentina, Brazil, Egypt, Latvia, Lithuania, Morocco, Peru and Romania. Asia is
conspicuously absent from these lists of non-member countries.
21
OECD, On-Line Guide to OECD Intergovernmental Activity (accessed 23 September 2010). http://
www2.oecd.org/OECDGROUPS2/Bodies/ListByNameView.aspx
THE OECD AND ASIA: WORLDS APART IN TODAY’S GLOBALIZATION?
This non-member participation in OECD activities could be regarded as
a form of “strapontin22-governance”. In other words, where a non-member
economy is very relevant to the Organisation’s work in a subject area, it is
invited to participate (that is, sit on a spare folding chair!). This pragmatism
has allowed the OECD to respond flexibly to the Asian-led globalization. But
it is not very attractive to Asian countries for several reasons. It puts them
in the position of “rule takers” whereby they basically have to accept the
OECD’s own rules of the game. In this context, they can also feel like “secondclass” citizens. It most clearly does not provide great encouragement to large
Asian countries to find that they are mere observers when very much smaller
European countries are full members.
4. WHY ASIA MATTERS TO THE OECD
Asia does and should matter immensely to the OECD based on how the
Organisation perceives its role and function. According to the present OECD
Secretary-General Angel Gurria, the “OECD has been working to produce a
more harmonious globalisation for many decades23”. The OECD is a “hub of
globalization”24. “The OECD’s ultimate goal is not only to identify problems,
measure them, compare them, and propose policy solutions, but about making
reform happen and evaluating the outcomes.”25 Since Asia has become the
main driver of globalization, its presence and participation are essential as the
Organisation seeks to help its members address the manifold economic, social
and environmental challenges of globalization.
Asia’s diversity is rich, and the potential interest for the OECD is similarly
very rich. Asia contains economies like Hong Kong, Macao, Singapore and
Taiwan26 which are as advanced and developed as most OECD countries, and
have much experience to share across a broad range of policy domains. For
example, school students from Shanghai, Hong Kong and Singapore have been
assessed as being significantly above the OECD average for reading ability,
and these same economies as well as Taiwan and Macao are above the OECD
22
“Strapontin” is a French word for a fold-out seat that is used in theatres and the Paris metro when
there is so many people that all the normal seats are full. When you get up off a strapontin, it folds
back suddenly in a rather unwelcoming manner.
23
Gurria, Angel, Globalisation: A Learning Curve. University of Sydney’s International Forum, 8 August
2008.
24
Gurria, A. (2007), ‘Making the World Economy Work Better’, OECD Observer No. 262, July 2007
http://www.oecdobserver.org/news/fullstory.php/aid/2294/Making_the_world_economy_work_better.
html
25
OECD. "Strategic Orientations by the Secretary-General", Meeting of the Council at Ministerial
Level, 27-28 May 2010. http://www.oecd.org/officialdocuments/displaydocumentpdf/?cote=c/
min(2010)1&doclanguage=en
26
Hong Kong, Singapore and Taiwan are each separately members of many organizations like APEC,
the Asian Development Bank and the World Trade Organisation, while Macao is a member of the
World Trade Organisation.
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average for science and mathematics performance27. Also, most of these
economies are major players in many fields. Even the liliputian Macao is a
very major player for financial governance issues in light of its very important
gambling industry.
Although the OECD’s interest in the large Asian economies of China, India
and Indonesia lies in their economic size more than their level of development,
a number of cities in China like Suzhou, Wuxi, Shenzen, Guangzhou, Shanghai,
Zhuhai, Foshan, Beijing and Xiamen have GDPs per capita above $15,000 a
year, well into the lower range of the OECD membership28. Fast growing Indian
cities like Bangalore and Mumbai are also moving in this direction.
Overall, GDP per capita in China, India and Indonesia is much lower than
the bottom ranges of the OECD’s membership. But their size is immense. China
already has the world second biggest economy after the US in purchasing
power parity terms, while India comes in fourth just after Japan. Indonesia’s
economy is much smaller, but it just eclipses Australia’s29. All three economies
are major trading nations with China being the world’s second biggest
exporter of merchandise goods, and India and Indonesia ranking 27th and 31st
respectively30. When it comes to carbon emissions, China is presently the world
biggest emitter, with India being 3rd and Indonesia 15th31. And in the lead-up to
the current global financial crisis, emerging Asia was the most dynamic growth
motor in the world economy, and following the crisis it is virtually the only part
of the world economy which has maintained strong economic growth32.
It is somewhat ironical that the Enhanced Engagement countries are
members of the G20, but not members of the OECD. This can limit the OECD’s
capacity to participate in and contribute to the activities of this Group, whose
leaders have “designated the G-20 to be the premier forum for our international
economic cooperation”33.
The OECD leadership is only too aware of the problem, as SecretaryGeneral Gurria made clear in his 2010 report to OECD Ministers: “Much has
been accomplished since the Enhanced Engagement Initiative was launched in
2007. Now, after three years, we need a “Quantum Leap” to improve the quality,
the depth, the breadth and the level of trust with our Enhanced Engagement
27
OECD Programme for International Student Assessment, 2009 Results. http://www.oecd.org/
document/61/0,3746,en_32252351_32235731_46567613_1_1_1_1,00.html. 2006 Science
Competencies for Tomorrow’s World, http://www.oecd.org/dataoecd/15/13/39725224.pdf
28
Demographia, Cities in China, Gross Domestic Product per Capita. 2007. http://www.demographia.
com/db-chinacitygdp.pdf
29
World Bank, World Development Indicators 2010. http://data.worldbank.org/data-catalog/worlddevelopment-indicators/wdi-2010
30
World Trade Organisation, International Trade Statistics 2009. http://www.wto.org/english/res_e/
statis_e/its2009_e/its09_toc_e.htm
31
Carbon Dioxide Information Analysis Center. Top 20 Emitting Countries by Total Fossil-Fuel CO2
Emissions for 2007.http://cdiac.ornl.gov/trends/emis/tre_tp20.html
32
IMF, World Economic Outlook Update. 7 July 2010. http://www.imf.org/external/pubs/ft/weo/2010/
update/02/index.htm
33
G20 Leaders’ Statement, the Pittsburgh Summit, September 24-25, 2009.
THE OECD AND ASIA: WORLDS APART IN TODAY’S GLOBALIZATION?
partners. We must create what Primer Minister Gordon Brown described as a
“comfort zone” with Enhanced Engagement countries, both bilaterally … and in
multilateral for a such as the G8, the G20 and the many specialized high-level
and Ministerial meetings where we participate.”
5. ADAPTING THE OECD TO ASIAN-LED GLOBALISATION
The past two decades have seen the OECD membership door becoming
more and more open. The weight of Asia in the global economy has grown
exponentially. At the same time, the weight of Asian countries in the OECD has
fallen further and further backwards, and OECD membership appears a more
difficult and less attractive proposition to large Asian economies. How could the
OECD as an organization adapt itself in response to Asian-led globalization?
5.1. THE HURDLE OF OECD’S “VALUES-BASED” MEMBERSHIP CRITERIA
The OECD remains in theory a values-based organization, even if those
values have not be strictly applied to some new members. This was reiterated by
the OECD Council following the 2007 membership invitation to five countries.
It indicated that matters like democracy, rule of law, human rights, etc. “may
be considered as particularly important parameters for judging whether a
candidate country ultimately should be invited to join OECD in accordance
with Article 16 of the Convention”34.
While these OECD’s values are extremely laudable, and should be an
aspiration for all countries, they pose several problems for the well functioning
of the Organisation. First, many observers raise questions about how rigorously
the values test has been applied in practice, citing cases like the quality of
Mexico’s democracy in 1994, Korea’s questionable respect for labour rights
in 1996, the weakly developed market economies in Central Europe in the
1990s, and Israel’s questionable respect for human rights today. Second, these
values are not very relevant to many global challenges like climate change
and financial stability. While OECD Secretary-General Angel Gurria stresses
that “the OECD is helping governments chart a way through the crisis with
a strategic response designed to create a stronger, cleaner and fairer global
economy for the future”35, at least one country (China), which is one of the
very most relevant to creating a stronger, cleaner and fairer economy, is not
presently eligible to become a member of the OECD because of its political
system. Third, countries like China can also wonder quite validly why such
stringent conditions should apply to OECD membership, when it is already
a member of the G20, WTO, IMF, World Bank and United Nations. Fourth,
34
OECD, A General Procedure for Future Accessions (adopted by the Council at its 1155th session of
10-13 May 2007), C(2007)31/FINAL – www.oecd.org – accessed 8 January 2010.
35
Angel Gurria, Message to OECD Forum 2009 – www.oecdforum.org – accessed 8 January 2010.
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the global financial crisis and European sovereign debt crisis have cast a long
shadow over the credibility of the application of North Atlantic values and
notions of good governance.
The lasting impression that many non-OECD countries have is that the
OECD remains a Western dominated organization, where Western countries
can push their values on other countries, rather than jointly addressing
common problems in a spirit of partnership. The US position is clear when
it says “Through its ground-breaking public policy research, ‘soft law,’ and
effective peer reviews, the OECD is a dynamic international incubator for new
ideas, providing the United States an unparalleled opportunity for influencing
other countries. … Most importantly, the OECD’s far-reaching work continues
to mirror the agenda of the United States, enabling the U.S. to influence
both members and non-members alike”36. In this regard, on a January 2010
visit to Paris, US Secretary of State Hilary Clinton said that the OECD “is an
international instrument that needs to be used even more”37 (Italics added).
The OECD needs to give very strong consideration regarding the extent
to which its strict its values-based approach to membership is credible and
constrains its effectiveness in tackling global issues by implicitly excluding certain
countries, like China and perhaps Singapore, from possible membership.
5.2. THE WEIGHT AND COMPLEXITY OF THE OECD ACCESSION PROCESS
The OECD membership examination process has become increasingly
complex. Over time, the OECD has accumulated a growing number of “policy
standards”, binding and non-binding, to which all new members have to
subscribe, even though they took no part in the creation and elaboration of
these instruments. In this sense, the OECD is truly a club, with an immense
weight of history. And potential new members could validly wonder whether it
was a club they wished to join since they have to align their national policies to
a set of policy standards which have had no role in establishing!
To quote the OECD itself, “The accession procedure is complex and can be
long, as it involves a series of examinations to assess a country’s ability to meet
OECD standards in a wide range of policy areas. This makes it difficult to bring
on board more than a small number of new members at the same time. …An
“Accession Roadmap” is developed to detail the process of accession. This
roadmap lists the reviews to be undertaken in various policy areas in order to
assess the country’s position with respect to the relevant OECD instruments,
standards and benchmarks and identifies the Committees and Working groups
to be involved in such reviews.38”
36
US Mission to the OECD – www.usoecd.org – accessed 9 January 2010.
Secretary Clinton Meets with Embassy Staff and their Families. Hillary Rodham Clinton, Secretary
of State, Ambassador’s Residence, Paris, France, January 29, 2010.
38
OECD webpage “OECD enlargement and engagement with non-members” – accessed 8 January
2010 – www.oecd.org.
37
THE OECD AND ASIA: WORLDS APART IN TODAY’S GLOBALIZATION?
This refers to this as the concept of the OECD “acquis”, which must be
accepted by all potential member countries, and has two principal elements.
Firstly, it implies the acceptance of all of the internal rules of the Organisation.
Secondly, it requires a positioning of the candidate country with respect to all
existing OECD instruments. The list of so-called instruments, standards and
benchmarks is simply mammoth covering virtually all aspects of government
policy. It is not surprising that the OECD’s four new members, Chile, Estonia,
Israel and Slovenia should still take about 3 years before passing all tests.
This accession process raises many fundamental issues. As the OECD puts
it rather diplomatically, “The accession process serves as a tool to increase the
policy convergence of the country considered for membership with existing
OECD members”39. In other words, potential new members are, for the price
of OECD membership, pressured into swallowing the rules of the organization.
The membership test puts potential new members in the situation of “rule
takers”, which leaves them subject to the rules, monitoring and enforcement
determined by the existing club members. Some observers have argued that
certain large OECD member countries take much more interest in new members
in the context of the accession process – a moment when they can extract
policy concessions – than when the countries actually join the organization. In
other words, for some large OECD countries, the greatest value in the OECD
seems to be concessions that can be negotiated during the accession process,
not the work of the Organisation itself!
This approach was very much discredited when countries like Mexico and
Korea experienced financial crises in the year following their membership of the
OECD. While it is debatable whether the OECD membership conditions were
indeed responsible, it seems clear that certain large OECD member countries,
through their bilateral relations, may have pushed for the capital account
liberalization and other policy measures that contributed to these crises. In this
way, the OECD remains very much an organization of the Cold War, a period of
time when North Atlantic countries established the global rules of the game,
and others were expected to follow. As evidenced in the Doha trade talks at the
World Trade Organisation, large emerging economies now want to participate
in global decision-making on an equal basis.
It is not surprising therefore that the countries most interested in OECD
membership are smaller countries, especially from Europe (which may have
already passed through similar hoops to join the European Union), and for
which the prestige of OECD membership means something. Smaller countries
may also have most to gain in adopting OECD’s best practices policies, as they
may not have sufficient resources to undertake independently the necessary
policy analysis.
Similarly, it is not surprising that large countries from Asia may not wish to
pass through such a process, when the ultimate benefits of OECD membership
39
OECD, “OECD Enlargement and Engagement with Non-members”, www.oecd.org – accessed 8
January 2010.
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seem less than compelling (Nobel-prize winning economist Paul Krugman40
recently referred to the OECD as “Conventional Wisdom Central”!). The OECD
needs to consider very seriously whether its present very onerous accession
process discourages large Asian countries from wishing to join the organization
and is therefore a barrier to the Orgnisation’s effectiveness as an international
organization.
5.3. THE COMPOSITION OF OECD’S MEMBERSHIP
International co-operation is focusing increasingly on the world’s systemically
important economies. This notion came to the fore with the creation, following
the Asian financial crisis, of the Group of Twenty (G-20) Finance Ministers
and Central Bank Governors in 1999. This group claims “to bring together
systemically important industrialized and developing economies to discuss key
issues in the global economy”41, and includes 5 countries from Asia, namely
China, India, Indonesia, Japan and Korea42. There are also five European
members of the G20, when the European Commission’s separate seat is
included. The G20 has also never pretended to be a values-based organization
– pluralist democracy and respect for human rights never came into the choice
of membership.
The political humiliation of the global financial crisis for the United States
and of the sovereign debt crisis for Europe forced Western countries to recognize
that large emerging economies, especially from Asia, deserve an equal seat at
the table. The West also now needs such emerging economies, particularly
those with deep pockets, in order to govern the world economy. And so they
turned to the G20 model for leaders’ meetings, five of which have so far
taken place (Washington DC November 2008, London April 2009, Pittsburgh
September 2009, Toronto June 2010, and Seoul November 2010). These
meetings have now gone beyond financial crisis issues, and have now dealt
with a broad array of issues like climate change and energy. And what’s more,
the leaders “designated the G-20 to be the premier forum for our international
economic cooperation”43, presumably superseding the G7/G8.
But what is most striking in today’s membership of the OECD is that a
good number of systemically important economies (ie, G20 countries) are
not members of the OECD, namely, Argentina, Brazil, China, India, Indonesia,
Russia, Saudi Arabia, and South Africa. And further, about two-thirds of the
OECD’s members are not systemically important (that is, Austria, Belgium,
40
Paul Krugman’s New York Times blog, 10 September 2010. http://krugman.blogs.nytimes.
com/2010/09/10/oops-at-the-oecd/
41
G20 website – www.g20.org – accessed 9 January 2010.
42
The following are members of the G20 – Argentina, Australia, Brazil, Canada, China, France,
Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, Republic of
Korea, Turkey, United Kingdom, United States of America, European Union.
43
G20 website – www.g20.org – accessed 9 January 2010.
THE OECD AND ASIA: WORLDS APART IN TODAY’S GLOBALIZATION?
Chile, Czech Republic, Denmark, Finland, Greece, Hungary, Iceland, Ireland,
Luxembourg, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak
Republic, Spain, Sweden and Switzerland).
A harsh interpretation would suggest that the OECD has quite simply the
wrong membership to be the “hub of globalization” and to be attractive to large
Asian countries. Indeed, there are signs that the shape of the OECD’s current
membership make it less and less attractive to some of its own systemically
important members. At the same time, the enthusiasm of small countries
for OECD membership shows that small countries benefit the most from
membership. It provides them with access to information and policy makers
that they may otherwise have difficulty in getting.
The creation of the G20 leaders’ process reflects the almost insurmountable
challenges of radically reforming the many post-war international organizations.
Networks like the G20 have many advantages over formal institutions like the
IMF or OECD, in that they can be flexibly created and changed44. At the same
time, being without a formal secretariat, they need to call on other organizations
for the implementation of their mandates.
Cold war organizations like the OECD, IMF and the World Bank are in
desperate need of major reform. In addition to ensuring that Asia is properly
represented, the OECD needs to give strong consideration to reducing the
weight of non-systemically important countries, such as via constituency
system, in order to make the OECD more attractive to large Asia countries,
and even to its own larger members.
6. ASIA IN THE OECD
The OECD seeks to be a major player on global issues, but the Asian sources
of global dynamism are insufficiently present at the OECD. If the OECD is to
be central to the newly emerging forms of global governance, such as the G20,
it had better expand its influence among the emerging world’s key economies,
particularly in Asia.
At the same time, in the wake of the global financial crisis, the G20 group
has assumed the role of the steering committee for the global economy. But
several members of the G20, including China, India and Indonesia are not
members of the OECD. The central argument of this paper is that the OECD
needs to launch a membership recruitment drive into Asia in order to remain an
effective organization. This recruitment drive should two arms: first, adopting
a more flexible approach regarding membership criteria and undertaking
institutional reforms, as discussed above; and awakening Asia’s interest in the
OECD.
44
Martinez-Diaz, Leonardo and Ngaire Woods, “The G20 – the Perils and Opportunities of Network
Governance for Developing Countries". Briefing Paper. Global Economic Governance Programme.
November 2009 www.globaleconomicgovernance.org
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The OECD has much to offer Asian countries. Its core business is multilateral
economic surveillance. It is usually conducted through a process of “peer review”
involving committees of national economic policy experts45. Surveillance can be
based on Secretariat research, like that ultimately published as the Economic
Outlook and Economic Surveys for its member countries and a number of
non-members. “Policy standards” across a vast array of topics like agriculture,
corporate governance, development co-operation, employment, environment
and taxation provide the framework for multilateral surveillance in these areas.
These policy standards are broadly recognized by the international community
(G20, G7/G8, Financial Stability Board) as being the “gold standard” for
economic, social and environmental policies.
Such multilateral surveillance is often criticized as lacking teeth,
notwithstanding the process of “peer group pressure”. It is however best seen
from a constructivist perspective in terms of the learning and socialization
that takes place. Even though OECD countries may disagree on many specific
policies, they are able to discuss policies based on a commonly agreed
analytical framework and data set. And views very often ultimately converge
thanks to this learning and socialization. This could also be of great benefit
to East Asia for developing its own surveillance activities. In the framework of
the Chang Mai Initiative Multilateralisation, an independent surveillance unit is
being established in Singapore (“ASEAN Plus Three Macroeconomic Research
Office” – AMRO)46.
A major benefit of OECD membership is being able to participate in this
multilateral surveillance, although an increasing number of non-member
economies do already participate. Another benefit of membership derives
from the market and international community recognition of a country’s
willingness to accept and commit to the OECD’s policy standards and values.
Even countries like China can appreciate the OECD’s multilateral surveillance.
It can be better to have a range of countries around the table rather being face
to face with one or two other major economies.
Asian economies would have much to gain from the OECD’s analytical work,
peer review and multilateral surveillance, and I will cite just a few topics:
1. The current global financial crisis has highlighted the need for Asia’s
emerging economies to develop sound social policies to help their
populations cope with the manifest insecurities of globalization. Even
China, which has sailed through the crisis thanks to its strong stimulus
package, reportedly saw some 20 million workers driven from cities
back to their rural homelands because of job losses.
45
OECD (2003), “Peer Review: an OECD Tool for Co-operation and Change” http://213.253.134.43/
oecd/pdfs/browseit/0103083E.PDF
46
Sussangkarn, Chalongphob, "The Chiang Mai Initiative Multilateralization: Origin, Development
and Outlook". Asian Development Bank Institute Working Paper. http://www.adbi.org/workingpaper/2010/07/13/3938.chiang.mai.initiative.multilateralization/
THE OECD AND ASIA: WORLDS APART IN TODAY’S GLOBALIZATION?
2. Even the most successful Asian economies have a long way to go in terms
of realizing their full potential and catching up the advanced member
countries of the OECD – better policies in the areas of education,
competition, and science and technology are vital to this challenge. As
Asian Development Bank indicators testify, many of Asia’s developing
countries have a long way to go in terms of achieving the Millennium
Development Goals47.
3. Asian societies are “ageing”, and at a much faster rate than the OECD
economies, raising challenges for retirement, pension and health policies
to name just a few. In contrast to OECD members, countries like China
will grow old before they become rich.
4. Asia’s societies are progressively become more open and democratic,
and this requires more sophisticated public governance, including
relations with civil society and other stakeholder groups.
5. OECD’s eurocentric character means that it can be a useful
organization through which to establish more relations with that
continent, something which many Asian countries are interested in
doing after so many years of US domination. Notwithstanding the
recent sovereign debt crisis, Europe is still a very important player
with total GDP around the same as the US.
In all these, and other areas, the OECD and its member countries have
much to offer in terms of both good and bad lessons of experience. And
while the OECD is now subject to much competition from private think tanks,
other international organisations, and even the national public policy research
outfits of some large member countries, it is unique in terms of its capacity
to bring together national policy makers to share experiences and guide the
Organisation’s work. In many ways, when it comes to international cooperation,
the OECD is still the best idea around.
At the same time, as major beneficiaries of globalization, Asia’s economies
arguably have a responsibility to adopt more of the OECD’s values-based
culture in terms of good governance and transparency. As the OECD
founding Convention says – “Members agree that they will keep each other
informed and furnish the Organisation with the information necessary for the
accomplishment of its tasks”48. This would ultimately be beneficial to them
and the global economy, and they would thereby become more responsible
stakeholders in the global system.
But the OECD has a great challenge convincing Asians of the Organisation`s
benefits when leading Asian intellectuals and opinion leaders like Singapore’s
Kishore Mahbubani speak of “Sunset OECD”49. He has argued that the OECD
47
Asian Development Bank, Key Indicators for Asia and the Pacific 2010, http://www.adb.org/
Documents/Books/Key_Indicators/2010/
OECD, Convention on the Organisation for Economic Cooperation and Development, Paris, 14th
December 1960 – www.oecd.org.
49
Kishore Mahbubani, The Myth of Western Aid. 7 August 2009 http://www.mahbubani.net/
48
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JOHN WEST
was set up “to assist countries in economic development and sustainable
economic growth .. (and) By any objective standards, the OECD has failed in its
mission.” He continued that the OECD “produces excellent research papers but
achieves little in delivering results on its core mission … after having failed in its
core mission, the OECD has clearly become a ‘sunset’ organisation”.
7. CONCLUDING COMMENTS
As the OECD enters its second half century, it is very much at a crossroads.
It is an organization which once represented the lion’s share of the world
economy, and much of the world’s economic leadership, and could thereby
serve its membership effectively. But today, the OECD is an organization that
has been substantially bypassed by Asian-led globalization as politics have
dominated economics in its choice of new members. Nine of the OECD’s
ten new members over the past two decades have been small/medium sized
countries from Europe, Latin America and the Middle East. Korea is the one
Asian exception.
If the OECD continues down this path, it is condemned to represent a
continuously declining share of the world economy. This will greatly compromise
its capacity to advise its members on the policy implications of “the economic,
social and environmental challenges of globalization”50, and thereby weaken
the Organisation. The OECD’s own leadership recognizes that there is a
problem when it argues for a “Quantum Leap” in the quality, the depth and he
breadth of relations with Enhanced Engagement partners, namely China, India,
Indonesia, Brazil and South Africa.
For the OECD to be a more effective and legitimate player in global governance,
it needs to make a major and immediate effort to recruit major Asian countries
as members, even if it means adopting a more flexible approach to membership
criteria and adapting the organisation. The OECD must recognize that the global
financial crisis has brought the “Western brand” (which the OECD represents)
into serious disrepute. This underlines the argument for greater flexibility with
respect to membership criteria. The membership equation has been weighted
too much in favour of the existing members which wield the bargaining power of
the membership prize, and thereby arguably deter the most interesting potential
new members which may not believe that the accession process and the possible
policy adjustments that will have to be made, are really worth the effort.
The OECD also needs to undertake a more proactive campaign to explain
the benefits of the Organisation to Asia’s emerging economies. They have
much to gain from joining the OECD and accepting and committing to the
Organisation’s policy standards. As major beneficiaries of globalization, Asia’s
leading economies arguably have a responsibility to adopt more of the OECD’s
articles%20by%20dean/myth%20of%20western%20aid.pdf
50
OECD, “The OECD’s Global Relations Programme 2009-10” – www.oecd.org
THE OECD AND ASIA: WORLDS APART IN TODAY’S GLOBALIZATION?
values-based culture in terms of good governance and transparency. Just as
importantly Asia can contribute to this organizational culture which has always
evolved and needs to evolve further.
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